How an emerging market firm overcomes liabilities and builds legitimacy in a high-quality institutional environment

Abstract

Objective: To examine how an emerging market firm adopts specific strategies to neutralize the liabilities of foreignness (LOF), emergingness (LOE) and outsidership (LOO), and to gain legitimacy in a high-quality institutional environment. Method: Single in-depth case study of a Brazilian firm in the information technology industry based on secondary data and interviews. Main Results: The study shows how the acquisition of a local company addressed the three liabilities: LOF, by acquiring knowledge on the host country’s institutional environment; LOE, by detaching the company image from the home country and emphasizing a global image; and LOO, by gaining access to already established connections to international networks by the acquired firm. Relevance/ Originality: There is still a dearth of literature on how firms from emerging economies other than China — and particularly from Latin America — strategize to mitigate LOF, LOE and LOO when internationalizing to high-quality institutional environments. Theoretical/ Methodological Contributions: To provide a fine-grained view of the relationship between LOF, LOE and LOO and their manifestations; and to provide an understanding of the relationship between the liabilities and the legitimation strategies adopted to overcome them along the international expansion of an emerging market high-tech firm from Latin America.

Keywords

• Liability
• Legitimacy
• Emerging Market Firm
• Developed Market
• Acquisition